SWEDEN – The roughly SEK187.3bn (€20.2bn) buffer fund Första AP-Fonden, or AP1, has appointed three private equity managers as part of its diversification strategy into alternative investments.
European asset and fund of funds manager LGT Capital Partners, private equity fund of funds manager WP Global Partners, and research-driven investment management firm Pacific Corporate Group have been appointed. They’ll run European, North American and global mandates respectively.
Standard Life, Wilshire and Hamilton Lane have also been approved as managers, but will not be funded at present, said the scheme in a statement.
Global consultant firm Towers Perrin advised the scheme during the tendering and selection process.
According to the terms of the agreement, AP1 will invest up to €300m a year in private equity, and this will be “roughly” equally divided between the three managers, an AP1 spokesperson told IPE.
However, because the agreement has only come into force halfway through this year, the amount invested in private equity for 2006 will be around the €150m mark.
“The managers are expected to build a high quality and well diversified private equity portfolio, on behalf of Första AP-Fonden, with an expected high, risk-adjusted return net of costs,” said the scheme in a statement.
Although AP1 has some “tiny, tiny” Nordic private equity investment, this is the first time that the scheme with roughly 3% invested in alternatives has invested in this asset class in a big way, said the spokesperson.
She added that AP1 has invested in private equity “for diversification reasons and returns after cost reasons”, amongst others.
Funding for private equity has been taken from all asset classes. However, the overall amount invested in private equity is negligible at present.
AP1 is planning to further increase its investment allocation to alternatives in the future.
“It could be hedge funds or real estate,” said the spokesperson, adding that no final decision has been taken yet.
AP1 has roughly 59% allocated to equities and 40% invested in fixed income.
In September 2004, IPE reported that AP1 was seeking “strategic partners” for around €326.5m in private equity. It was looking to appoint one or more partners to provide advice on three mandates covering global, the US and Europe.